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734 Chapter 25


ECONOMICS The Industrial
Revolution led to economic,
social, and political reforms.
Many modern social welfare
programs developed during this
period of reform.
laissez faire
Adam Smith
Karl Marx
SETTING THE STAGE In industrialized countries in the 19th century, the
Industrial Revolution opened a wide gap between the rich and the poor. Business
leaders believed that governments should stay out of business and economic
affairs. Reformers, however, felt that governments needed to play an active role
to improve conditions for the poor. Workers also demanded more rights and pro-
tection. They formed labor unions to increase their influence.
The Philosophers of Industrialization
The term laissez faire (LEHSayFAIR) refers to the economic policy of letting
owners of industry and business set working conditions without interference.
This policy favors a free market unregulated by the government. The term is
French for let do, and by extension, let people do as they please.
Laissez-faire Economics Laissez-faire economics stemmed from French eco-
nomic philosophers of the Enlightenment. They criticized the idea that nations
grow wealthy by placing heavy tariffs on foreign goods. In fact, they argued, gov-
ernment regulations only interfered with the production of wealth. These philoso-
phers believed that if government allowed free tradethe flow of commerce in
the world market without government regulationthe economy would prosper.
Adam Smith, a professor at the University of Glasgow, Scotland, defended
the idea of a free economy, or free markets, in his 1776 book The Wealth of
Nations. According to Smith, economic liberty guaranteed economic progress.
As a result, government should not interfere. Smiths arguments rested on what
he called the three natural laws of economics:
the law of self-interestPeople work for their own good.
the law of competitionCompetition forces people to make a better product.
the law of supply and demandEnough goods would be produced at the
lowest possible price to meet demand in a market economy.
The Economists of Capitalism Smiths basic ideas were supported by British
economists Thomas Malthus and David Ricardo. Like Smith, they believed that nat-
ural laws governed economic life. Their important ideas were the foundation of lais-
sez-faire capitalism. Capitalism is an economic system in which the factors of
production are privately owned and money is invested in business ventures to make
a profit. These ideas also helped bring about the Industrial Revolution.
Reforming the Industrial World
Summarizing Use a
chart to summarize the
characteristics of
capitalism and socialism.
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In An Essay on the Principle of Population, written in
1798, Thomas Malthus argued that population tended to
increase more rapidly than the food supply. Without wars
and epidemics to kill off the extra people, most were des-
tined to be poor and miserable. The predictions of Malthus
seemed to be coming true in the 1840s.
David Ricardo, a wealthy stockbroker, took Malthuss
theory one step further in his book, Principles of Political
Economy and Taxation (1817). Like Malthus, Ricardo
believed that a permanent underclass would always be poor.
In a market system, if there are many workers and abundant
resources, then labor and resources are cheap. If there are
few workers and scarce resources, then they are expensive.
Ricardo believed that wages would be forced down as
population increased.
Laissez-faire thinkers such as Smith, Malthus, and Ricardo
opposed government efforts to help poor workers. They
thought that creating minimum wage laws and better working
conditions would upset the free market system, lower profits,
and undermine the production of wealth in society.
The Rise of Socialism
In contrast to laissez-faire philosophy, which advised gov-
ernments to leave business alone, other theorists believed
that governments should intervene. These thinkers believed
that wealthy people or the government must take action to
improve peoples lives. The French writer Alexis de
Tocqueville gave a warning:
Consider what is happening among the working classes. . . . Do you not see spreading
among them, little by little, opinions and ideas that aim not to overturn such and such a
ministry, or such laws, or such a government, but society itself, to shake it to the
foundations upon which it now rests?
Utilitarianism English philosopher Jeremy Bentham modified the ideas of Adam
Smith. In the late 1700s, Bentham introduced the philosoophy of utilitarianism.
Bentham wrote his most influential works in the late 1700s. According to Benthams
theory, people should judge ideas, institutions, and actions on the basis of their util-
ity, or usefulness. He argued that the government should try to promote the greatest
good for the greatest number of people. A government policy was only useful if it
promoted this goal. Bentham believed that in general the individual should be free
to pursue his or her own advantage without interference from the state.
John Stuart Mill, a philosopher and economist, led the utilitarian movement in
the 1800s. Mill came to question unregulated capitalism. He believed it was wrong
that workers should lead deprived lives that sometimes bordered on starvation. Mill
wished to help ordinary working people with policies that would lead to a more
equal division of profits. He also favored a cooperative system of agriculture and
womens rights, including the right to vote. Mill called for the government to do
away with great differences in wealth. Utilitarians also pushed for reforms in the
legal and prison systems and in education.
The Industrial Revolution 735
What did
Malthus and
Ricardo say about
the effects of popu-
lation growth?
Adam Smith
In his book The Wealth of Nations,
Smith argued that if individuals freely
followed their own self-interest, the
world would be an orderly and pro-
gressive place. Social harmony would
result without any government
direction, as if by an invisible hand.
Smith applied an invisible hand
of his own. After his death, people
discovered that he had secretly
donated large sums of his income
to charities.
RESEARCH LINKS For more on Adam
Smith, go to
How did Mill
want to change the
economic system?
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Utopian Ideas Other reformers took an even more active approach. Shocked by
the misery and poverty of the working class, a British factory owner named Robert
Owen improved working conditions for his employees. Near his cotton mill in New
Lanark, Scotland, Owen built houses, which he rented at low rates. He prohibited
children under ten from working in the mills and provided free schooling.
Then, in 1824, he traveled to the United States. He founded a cooperative com-
munity called New Harmony in Indiana, in 1825. He intended this community to
be a utopia, or perfect living place. New Harmony lasted only three years but
inspired the founding of other communities.
Socialism French reformers such as Charles Fourier (FUReeAY), Saint-Simon
(san seeMOHN), and others sought to offset the ill effects of industrialization with
a new economic system called socialism. In socialism, the factors of production are
owned by the public and operate for the welfare of all.
Socialism grew out of an optimistic view of human nature, a belief in progress,
and a concern for social justice. Socialists argued that the government should plan
the economy rather than depend on free-market capitalism to do the job. They
argued that government control of factories, mines, railroads, and other key indus-
tries would end poverty and promote equality. Public ownership, they believed,
would help workers, who were at the mercy of their employers. Some socialists
such as Louis Blancadvocated change through extension of the right to vote.
Marxism: Radical Socialism
The writings of a German journalist named Karl Marx intro-
duced the world to a radical type of socialism called
Marxism. Marx and Friedrich Engels, a German whose father
owned a textile mill in Manchester, outlined their ideas in a
23-page pamphlet called The Communist Manifesto.
The Communist Manifesto In their manifesto, Marx and
Engels argued that human societies have always been
divided into warring classes. In their own time, these were
the middle class haves or employers, called the bour-
geoisie (BURzhwahZEE), and the have-nots or workers,
called the proletariat (PROHlihTAIReeiht). While the
wealthy controlled the means of producing goods, the poor
performed backbreaking labor under terrible conditions.
This situation resulted in conflict:
Freeman and slave, patrician and plebeian, lord and serf, guild-
master and journeyman, in a word, oppressor and oppressed,
stood in constant opposition to one another, carried on an
uninterrupted, now hidden, now open fight, a fight that each
time ended, either in a revolutionary reconstitution of society at
large, or in the common ruin of the contending classes.
KARL MARX and FRIEDRICH ENGELS, The Communist Manifesto (1848)
According to Marx and Engels, the Industrial Revolution
had enriched the wealthy and impoverished the poor. The
two writers predicted that the workers would overthrow
the owners: The proletarians have nothing to lose but
their chains. They have a world to win. Workingmen of all
countries, unite.
Karl Marx
Karl Marx studied philosophy at the
University of Berlin before he turned
to journalism and economics. In
1849, Marx joined the flood of
radicals who fled continental Europe
for England. He had declared in The
Communist Manifesto that the
working men have no country.
Marxs theories of socialism and
the inevitable revolt of the working
class made him little money. He
earned a meager living as a journalist.
His wealthy coauthor and fellow
German, Friedrich Engels, gave Marx
financial aid.
RESEARCH LINKS For more on Karl
Marx, go to
736 Chapter 25
What were the
ideas of Marx and
Engels concerning
relations between
the owners and the
working class?
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The Future According to Marx Marx believed that the capitalist system, which
produced the Industrial Revolution, would eventually destroy itself in the following
way. Factories would drive small artisans out of business, leaving a small number of
manufacturers to control all the wealth. The large proletariat would revolt, seize the
factories and mills from the capitalists, and produce what society needed. Workers,
sharing in the profits, would bring about economic equality for all people. The
workers would control the government in a dictatorship of the proletariat. After a
period of cooperative living and education, the state or government would wither
away as a classless society developed.
Marx called this final phase pure communism. Marx described communism as
a form of complete socialism in which the means of productionall land, mines,
factories, railroads, and businesseswould be owned by the people. Private prop-
erty would in effect cease to exist. All goods and services would be shared equally.
Published in 1848, The Communist Manifesto produced few short-term results.
Though widespread revolts shook Europe during 1848 and 1849, Europes leaders
eventually put down the uprisings. Only after the turn of the century did the
fiery Marxist pamphlet produce explosive results. In the 1900s, Marxism inspired
revolutionaries such as Russias Lenin, Chinas Mao Zedong, and Cubas Fidel Castro.
These leaders adapted Marxs beliefs to their own specific situations and needs.
Individuals and businesses own property and the
means of production.
Progress results when individuals follow their own
Businesses follow their own self-interest by
competing for the consumers money. Each business
tries to produce goods or services that are better
and less expensive than those of competitors.
Consumers compete to buy the best goods at the
lowest prices. This competition shapes the market
by affecting what businesses are able to sell.
Government should not interfere in the economy
because competition creates efficiency in business.
The community or the state should own property
and the means of production.
Progress results when a community of producers
cooperate for the good of all.
Socialists believe that capitalist employers take
advantage of workers. The community or state must
act to protect workers.
Capitalism creates unequal distribution of wealth
and material goods. A better system is to distribute
goods according to each persons need.
An unequal distribution of wealth and material
goods is unfair. A better system is to distribute
goods according to each persons need.
Capitalism Socialism
The Industrial Revolution 737
Capitalism vs. Socialism
The economic system called capitalism developed gradually over centuries,
beginning in the late Middle Ages. Because of the ways industrialization
changed society, some people began to think that capitalism led to certain
problems, such as the abuse of workers. They responded by developing a
new system of economic ideas called socialism.
SKILLBUILDER: Interpreting Charts
1. Developing Historical Perspective Consider the following people from 19th-century Britain: factory worker, shop owner, factory
owner, unemployed artisan. Which of them would be most likely to prefer capitalism and which would prefer socialism? Why?
2. Forming and Supporting Opinions Which system of economic ideas seems most widespread today? Support your opinion.
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738 Chapter 25
In The Communist Manifesto, Marx and Engels stated
their belief that economic forces alone dominated society.
Time has shown, however, that religion, nationalism, ethnic
loyalties, and a desire for democratic reforms may be as
strong influences on history as economic forces. In addi-
tion, the gap between the rich and the poor within the indus-
trialized countries failed to widen in the way that Marx and
Engels predicted, mostly because of the various reforms
enacted by governments.
Labor Unions and Reform Laws
Factory workers faced long hours, dirty and dangerous
working conditions, and the threat of being laid off. By the
1800s, working people became more active in politics. To
press for reforms, workers joined together in voluntary
labor associations called unions.
Unionization A union spoke for all the workers in a par-
ticular trade. Unions engaged in collective bargaining,
negotiations between workers and their employers. They
bargained for better working conditions and higher pay. If
factory owners refused these demands, union members
could strike, or refuse to work.
Skilled workers led the way in forming unions because
their special skills gave them extra bargaining power.
Management would have trouble replacing such skilled
workers as carpenters, printers, and spinners. Thus, the ear-
liest unions helped the lower middle class more than they
helped the poorest workers.
The union movement underwent slow, painful growth in
both Great Britain and the United States. For years, the British government denied
workers the right to form unions. The government saw unions as a threat to social
order and stability. Indeed, the Combination Acts of 1799 and 1800 outlawed
unions and strikes. Ignoring the threat of jail or job loss, factory workers joined
unions anyway. Parliament finally repealed the Combination Acts in 1824. After
1825, the British government unhappily tolerated unions.
British unions had shared goals of raising wages for their members and improv-
ing working conditions. By 1875, British trade unions had won the right to strike and
picket peacefully. They had also built up a membership of about 1 million people.
In the United States, skilled workers had belonged to unions since the early
1800s. In 1886, several unions joined together to form the organization that would
become the American Federation of Labor (AFL). A series of successful strikes
won AFL members higher wages and shorter hours.
Reform Laws Eventually, reformers and unions forced political leaders to look
into the abuses caused by industrialization. In both Great Britain and the United
States, new laws reformed some of the worst abuses of industrialization. In the
1820s and 1830s, for example, Parliament began investigating child labor and
working conditions in factories and mines. As a result of its findings, Parliament
passed the Factory Act of 1833. The new law made it illegal to hire children under
9 years old. Children from the ages of 9 to 12 could not work more than 8 hours a
day. Young people from 13 to 17 could not work more than 12 hours. In 1842, the
Mines Act prevented women and children from working underground.
Communism Today
Communism expanded to all parts
of the world during the Cold War that
followed the end of World War II.
(See map on page 963.) At the peak
of Communist expansion in the
1980s, about 20 nations were
Communist-controlled, including two
of the worlds largestChina and the
Soviet Union. However, dissatisfaction
with the theories of Karl Marx had
been developing.
Eventually, most Communist
governments were replaced. Today,
there are only five Communist
countriesChina, North Korea,
Vietnam, and Laos in Asia and Cuba
in the Caribbean. (See map above.)
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In 1847, the Parliament passed a bill that helped
working women as well as their children. The Ten
Hours Act of 1847 limited the workday to ten hours
for women and children who worked in factories.
Reformers in the United States also passed laws
to protect child workers. In 1904, a group of pro-
gressive reformers organized the National Child
Labor Committee to end child labor. Arguing that
child labor lowered wages for all workers, union
members joined the reformers. Together they pres-
sured national and state politicians to ban child
labor and set maximum working hours.
In 1919, the U.S. Supreme Court objected to a
federal child labor law, ruling that it interfered with
states rights to regulate labor. However, individual
states were allowed to limit the working hours of
women and, later, of men.
The Reform Movement Spreads
Almost from the beginning, reform movements rose in response to the negative
impact of industrialization. These reforms included improving the workplace and
extending the right to vote to working-class men. The same impulse toward reform,
along with the ideals of the French Revolution, also helped to end slavery and pro-
mote new rights for women and children.
The Abolition of Slavery William Wilberforce, a highly religious man, was a mem-
ber of Parliament who led the fight for abolitionthe end of the slave trade and slav-
ery in the British Empire. Parliament passed a bill to end the slave trade in the British
West Indies in 1807. After he retired from Parliament in 1825, Wilberforce contin-
ued his fight to free the slaves. Britain finally abolished slavery in its empire in 1833.
British antislavery activists had mixed motives. Some, such as the abolitionist
Wilberforce, were morally against slavery. Others viewed slave labor as an eco-
nomic threat. Furthermore, a new class of industrialists developed who supported
cheap labor rather than slave labor. They soon gained power in Parliament.
In the United States the movement to fulfill the promise of the Declaration of
Independence by ending slavery grew in the early 1800s. The enslavement of
African people finally ended in the United States when the Union won the Civil
War in 1865. Then, enslavement persisted in the Americas only in Puerto Rico,
Cuba, and Brazil. In Puerto Rico, slavery was ended in 1873. Spain finally abol-
ished slavery in its Cuban colony in 1886. Not until 1888 did Brazils huge
enslaved population win freedom.
The Fight for Womens Rights The Industrial Revolution proved a mixed bless-
ing for women. On the one hand, factory work offered higher wages than work
done at home. Women spinners in Manchester, for example, earned much more
money than women who stayed home to spin cotton thread. On the other hand,
women factory workers usually made only one-third as much money as men did.
Women led reform movements to address this and other pressing social issues.
During the mid-1800s, for example, women formed unions in the trades where they
dominated. In Britain, some women served as safety inspectors in factories where
other women worked. In the United States, college-educated women like Jane
Addams ran settlement houses. These community centers served the poor residents
of slum neighborhoods.
The Industrial Revolution 739
What were some of
the important
reform bills passed
in Britain during
this period?

workers meet
to plan their
strategy before
a strike.
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740 Chapter 25
In both the United States and Britain, women who had
rallied for the abolition of slavery began to wonder why
their own rights should be denied on the basis of gender.
The movement for womens rights began in the United
States as early as 1848. Women activists around the world
joined to found the International Council for Women in
1888. Delegates and observers from 27 countries attended
the councils 1899 meeting.
Reforms Spread to Many Areas of Life In the United States
and Western Europe, reformers tried to correct the problems
troubling the newly industrialized nations. Public education
and prison reform ranked high on the reformers lists.
One of the most prominent U.S. reformers, Horace Mann
of Massachusetts, favored free public education for all chil-
dren. Mann, who spent his own childhood working at hard
labor, warned, If we do not prepare children to become
good citizens . . . if we do not enrich their minds with
knowledge, then our republic must go down to destruction.
By the 1850s, many states were starting public school sys-
tems. In Western Europe, free public schooling became
available in the late 1800s.
In 1831, French writer Alexis de Tocqueville had con-
trasted the brutal conditions in American prisons to the
extended liberty of American society. Those who sought
to reform prisons emphasized the goal of providing prison-
ers with the means to lead to useful lives upon release.
During the 1800s, democracy grew in industrialized
countries even as foreign expansion increased. The industri-
alized democracies faced new challenges both at home and
abroad. You will learn about these challenges in Chapter 26.
TERMS & NAMES 1. For each term or name, write a sentence explaining its significance.
laissez faire Adam Smith capitalism utilitarianism socialism Karl Marx communism union strike
2. What characteristics do
capitalism and socialism
3. What were Adam Smiths three
natural laws of economics?
4. What kind of society did early
socialists want?
5. Why did workers join together
in unions?
Research a present-day corporation. Prepare an economic report that includes the
corporations structure, products or services, number of employees, and any other relevant
economic information you are able to find.
6. IDENTIFYING PROBLEMS What were the main problems
faced by the unions during the 1800s and how did they
overcome them?
7. DRAWING CONCLUSIONS Why do you think that Marxs
dictatorship of the proletariat did not happen?
8. MAKING INFERENCES Why did the labor reform
movement spread to other areas of life?
9. WRITING ACTIVITY Write a two-paragraph
persuasive essay on how important economic forces are
in society. Support your opinion using evidence from this
and previous chapters.
Jane Addams
After graduating from college, Jane
Addams wondered what to do with
her life.
I gradually became convinced that
it would be a good thing to rent a
house in a part of the city where
many primitive and actual needs
are found, in which young women
who had been given over too
exclusively to study, might . . .
learn of life from life itself.
Addams and her friend Ellen Starr
set up Hull House in a working-class
district in Chicago. Eventually the
facilities included a nursery, a gym, a
kitchen, and a boarding house for
working women. Hull House not only
served the immigrant population of
the neighborhood, it also trained
social workers.
Why might women
abolitionists have
headed the move-
ment for womens
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